The sharemarket rose 0.6 per cent yesterday as investors piled into banks to take advantage of their dividend yields, amid optimism the country's biggest lenders would report rising profits this week and next.
The benchmark S&P/ASX 200 index gained 28.3 points to 5125.8, building on last week's 3.4 per cent rally to narrow in on a multi-year high of 5163.5 touched last month.
Australia was one of the few regional markets open, with exchanges in Japan and China shut for national holidays. The local gains came despite a weak lead from Wall Street and declines in metal and oil prices.
"There is a bit of positioning occurring before three of the big four banks report this week and next," said Chris Macdonald, an investment adviser at RBS Morgans in Sydney.
Australia's near-record-low interest rates have made cash investments less attractive, and in turn increased the appeal of banking stocks with comparatively high dividend yields.
"Investors are happy to continue buying yield even though there's been a bit of yield compression as a consequence," Mr Macdonald said.
ANZ Bank, which reports first-half earnings today, climbed 0.7 per cent as analysts forecast a cash profit of $3.12 billion, about 5 per cent higher than in the six months ended March 2012.
The result would probably be helped by a lower bad debt charge, said Chris Weston, chief market strategist at broker IG in Melbourne. Mr Weston expects the bank to pay a first-half dividend of about 68c a share.
Westpac, which releases its first-half result on Friday, jumped 1.7 per cent, while National Australia Bank, which does so next week, gained 1.4 per cent.
Commonwealth Bank's financial year ends on June 30 and it will report first-quarter results in mid-May. Its shares added 1.1 per cent.
Mining giants BHP Billiton and Rio Tinto both fell, 0.1 per cent and 0.8 per cent respectively, after West Texas Intermediate crude declined 0.7 per cent on Friday to $US93. Copper and aluminium lost 2.1 per cent and 3.3 per cent respectively.
A silver lining to the disappointing US GDP figure was that it may encourage the Federal Reserve to keep on stimulating the US economy with so-called quantitative easing. A higher-than-expected reading might well have prompted an early rollback of its bond-buying program.
Aside from bank profits, key events this week include a rate decision by the European Central Bank, monthly US non-farm payroll data and Chinese inflation figures. Australian healthcare stocks were aided by a strong quarterly result from Resmed on Friday. Resmed, which is also listed in the US, was up 3.6 per cent. Rival Primary Healthcare rose 2.5 per cent, while CSL added 1.3 per cent.
The Australian dollar traded slightly lower in thin Asian trade. At 5pm AEST, the dollar was trading at $US1.0324, up US0.14c.
The ECB is tipped by some analysts to cut its benchmark interest rate. Still, traders will be looking for its latest assessment of the region's debt crisis, widely blamed for stunting global growth. In the US, the Fed isn't expected to alter its bond-buying program but any hint of a downbeat tone on the domestic economy could further weigh on the greenback and help support the Aussie dollar.
"While there may be more debate about when to start slowing quantitative easing, it's likely that the recent round of softer economic activity data and inflation in the US will have left the doves at the Fed in the ascendancy," said Shane Oliver, chief economist at AMP Capital.